Business debt is intimidating when the debt has grown so large that paying off the debt seems like something that will never happen. At this point, bankruptcy might become a better alternative to sinking into more debt. Finding out how bankruptcy can reorganize business debt may help you escape your own business debt. Talk to a Chattanooga bankruptcy lawyer to explore this further.
Types of Bankruptcy for Small Businesses
Small business owners may not have to struggle with balancing multiple financial responsibilities with crippling business debt forever. There are multiple types of bankruptcy for small businesses that can help small business owners escape their business debt. The main benefit is escaping debt while the downside is a lower credit score.
However, the downside of not filing for bankruptcy is being sued by the creditors who let you borrow money for your business. Creditors can take legal action against you and force you to pay back all business debt. In some cases, this may turn into repossession of property or wage garnishment.
The types of bankruptcy that can be used for small business owners include Chapter 7, Chapter 13, and Chapter 11 bankruptcy. Chapter 7 bankruptcy will liquidate any nonexempt property to pay off debt. In other words, certain property you own will be sold off to pay back creditors. Chapter 13 and 11 bankruptcy involves reorganizing your business debt into a more affordable payment plan.
How Debt Reorganization Helps Small Businesses
The way Chapter 13 bankruptcy helps small businesses reorganize debt is by giving you three to five years to pay back business debt. This means lower monthly payments, lower interest rates, and more time to pay back the debt. During this time you will have greater protection from creditor harassment and repossession.
To file for Chapter 13 bankruptcy, be prepared to provide your proof of income, a list of your properties, a list of your monthly expenses, and tax information. You will also be asked for a list of the creditors you owe debt to. Keep in mind that Chapter 13 bankruptcy can only be used by individuals.
This means that small businesses that are considered sole proprietorships have the option to file for Chapter 13 bankruptcy. In other words, you must be the sole owner of the business with no other employees to qualify for this type of bankruptcy.
Small business owners can file for Chapter 11 bankruptcy if they are run by a sole proprietor, corporation, or partnership. They can file under a small business case or subchapter V, each with different eligibility requirements. Chapter 11 bankruptcy allows you to keep running your business and borrowing new money while participating in a new debt repayment plan.
Contact Tom Bible Law Today
Business debt can feel impossible to escape from. Feel free to contact us at Tom Bible Law today at (423) 424-3116 for a consultation about your business debt. Our legal team of Tennessee bankruptcy attorneys might be able to help you escape business debt through bankruptcy. We are located in the Tennessee cities of Chattanooga and Tullahoma.